Welcome to the third quarter of Commercial Edge for 2023, our quarterly update on the outlook for the office and industrial markets across the key regional cities in which we operate.
34 offices across the UK, including 9 in central London
National
Head of Research
Daniel Francis
020 7518 3301 | EMAIL >
Associate Research Analyst
Rad Radev
020 7518 3270 | EMAIL >
Head of Commercial
Scott Harkness
020 7518 3236 | EMAIL >
Research
Partner, Leeds
Chris Hartnell
0113 203 1079 | EMAIL >
Leeds
Bath
Partner, Bath
Philip Marshall
01225 747261 | EMAIL >
Bristol
Partner, Bristol
Andrew Hardwick
0117 363 5694 | EMAIL >
Oxfordshire
Partner, Oxford
Jon Silversides
01865 404458 | EMAIL >
Cambridge
Partner, Cambridge
Will Rooke
01223 326815 | EMAIL >
Birmingham
Partner, Birmingham
Alex Tross
0121 306 0401 | EMAIL >
National Overview
Birmingham / Midlands
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Total office take-up across the Commercial Edge cities amounted to 736,947 sq ft in Q3 2023, which was 8% up quarter on quarter, but 6% down year on year, and 20% below the five-year quarterly average. Office take-up has remained below pre-pandemic levels, with a 22% decrease in the quarterly average since the start of the pandemic, compared to the five years leading up to 2020.
Leasing activity remained relatively robust in Bristol, Leeds and Oxford, but was weaker than in Q2 in all of the other Commercial Edge cities. Strong demand for the very best space has pushed prime rents upwards in recent years. Oxfordshire and Cambridge have seen strong annual rental growth due to high demand and limited prime stock. New developments have also set new benchmarks in Bristol, Bath, and Leeds, with prime rents now at £44 psf, £36 psf, and £37 psf respectively. Moving forward, we anticipate rental growth performance to widen. Prime buildings will outperform secondary ones as companies zero in on top-tier spaces to attract staff, serve clients, and meet rising environmental standards. The move to hybrid work, which typically demands less space, paired with the energy regulations introduced in April 2023, will expedite the retirement of older properties. Proposed stricter regulations in the upcoming years will only amplify this shift.
Industrial take-up across the Commercial Edge cities picked up a little in Q3 2023 compared with the second quarter. At 2.4 million sq ft, take-up in Q3 was 9% up quarter on quarter but 13% down compared with Q3 2022, and 24% below the five-year quarterly average. Reduced take-up in recent quarters follows exceptionally strong levels in 2020-2022 when the quarterly figures averaged 3.2 million sq ft. This record demand for industrial property was driven by pandemic-specific requirements as well as accelerated change in global supply chains. Although demand has weakened against a backdrop of subdued economic growth and high inflation, the overall level of requirements remains robust and take-up is strong relative to the average over the decade prior to 2020. Occupier demand will continue to be driven by the ongoing structural shift towards e-commerce and the push towards net-zero carbon emissions. This should support leasing activity, especially in the prime segment, and present continued opportunities for investors.
Data source: Carter Jonas
"Occupier demand will continue to be driven by the ongoing structural shift towards e-commerce and the push towards net-zero carbon emissions. "
Nick Waddington
0121 824 0771 | EMAIL >
"Prime buildings will outperform secondary ones as companies zero in on top-tier spaces to attract staff, serve clients, and meet rising environmental standards."
7%
9.4%
7.5%
Vacancy rate
Availability rate
Prime yields
The Bath office market remains challenging as we enter the final quarter of 2023. To date, only 35,000 sq ft of space has been transacted in central Bath, with slightly more in the surrounding area. Enquiries remain subdued, as most occupiers are unsure of their space requirements and continue to seek higher-quality space to entice employees back to the office.
Data sources: Carter Jonas, CoStar
Somerdale Pl James St W Walcot St
Property
IVC Evidensia Bath Mind Thrive Bath
Tenant
16,931 1,065 900
Area (sq ft)
OOT CC CC
CC/OOT
Decisions are slow, and many transactions are taking longer to close. In central Bath, we are starting to see some lower-quality office space being converted to residential use, which should help to improve the overall quality of the office stock. Fundamentally, the city's lack of available housing is making it more difficult for employers to recruit and retain employees, who are reluctant to commute long distances. Hopefully, over time, we will see a better balance between residential and office space in the market, resulting in fewer, but higher-quality, offices.
£36 psf
Q-o-Q
Prime office rent Q3
19,311 sq ft
-14%
5-Y average
5%
Office take up Q3
8.9%
10.1%
5.75%
£40 psf
131,504 sq ft
City centre
Out of town
£26 psf
41,417 sq ft
6 Brindley Place Ingenuity House 103 Colmore Row Quayside Tower 15 Colmore Row
Lloyds Bank Orega EFG Harris Allday EDA Fisher German
59,896 30,633 12,162 9,126 7,227
CC OOT CC CC CC
Brindley Place Titan 10 Distribution Centre Gracechurch Centre
HSBC Zurich Insurance M&G
Seller
Veld Capital/Praxis Capital St Modwen Birmingham Property Group/SAV Group
Buyer
£125 million £27 million £18 million
Price
Data sources: Carter Jonas, CoStar, RCA
£10.00 psf
Prime industrial rent Q3
3.9 million sq ft
Industrial take up Q3
Prologis RFI DIRFT Prologis Park Triangle Tyseley Park Xdock 163
Inditex IFCO ModPods Rexville Solutions Lloyd Fraser
627,707 328,305 311,261 165,177 163,423
Northampton Coventry Coventry Birmingham Lutterworth
Submarket
Pallet Network hub Morrisons Distribution Centre Wilko Distribution Hub
Mulberry Developments Morrisons DHL
£64 million Part of portfolio £48 million
Midlands key sale transactions Q4 2022
Data sources: Carter Jonas, CoStar, EG Radius, RCA
Prime office rent Q1
Office take up Q1
*2022 forecast
Type
Office Industrial Retail
Yield
11.00% 6.25% TBC
£140 million £42.6 million £10 million
4.3%
Midlands
5.5%
-26%
-22%
1%
-51%
-23%
-44%
2,500
Millions
2,000
1,000
1,500
500
0
The Birmingham office market remains challenging, with transaction volumes in the third quarter returning to Q1 levels, following a positive Q2. Total Q3 take-up was 131,504 sq ft, down 30% on the same quarter last year. One single transaction, the 59,896 sq ft letting to Lloyds at 6 Brindleyplace, accounted for 46% of that total, and there was only one other deal in excess of 10,000 sq ft. The out-of-town market was similarly subdued, with a total quarterly take-up of 41,497 sq ft (just 584 sq ft more than Q2). Again, one transaction, the 30,633 sq ft letting to serviced office provider Orega at Ingenuity House, accounted for 74% of the quarter's total.
The Midlands industrial market remains buoyant, with occupiers committing to a range of unit sizes. A continued supply shortage, exacerbated by a slowdown in construction starts due to high construction and debt costs, has kept rents strong and even pushed them up in some locations. New speculative and refurbished modern units remain in high demand, as evidenced by Inditex taking Prologis' 627,707 sq ft speculative unit at DIRFT and IFCO taking the 328,305 sq ft DC10 refurbished unit at Prologis Park, Coventry. It is also encouraging that much of the tenant "grey space" that came onto the market earlier in the year has now been taken up by companies such as Dascher, Yusen Logistics, Ebrex, and Lloyd Fraser.
"The Birmingham office market remains challenging, with transaction volumes in the third quarter returning to Q1 levels."
8.5%
Data sources: Carter Jonas, Experian, Bristol Office Agents Society, RCA, CoStar, EG Radius
10.3%
6%
£44.00 psf
£28.50 psf
77,253 sq ft
Whilst take-up remains sluggish in central Bristol at 77,253 sq ft in Q3 2023, the shortage of high-quality medium-sized accommodation has underpinned strong rental levels which have inched up to a headline of £44.00 psf. There is healthy pent-up demand which should see improved take-up in Q4 2023 and in 2024. The out-of-town market is performing above the 10-year trend in terms of take-up and rental levels are steady as the lack of new and refurbished supply is a brake on rental growth. The launch of 1000 Aztec West in November will break the mould in terms of the quality of out-of-town offices available and headline rental levels. Owner-occupier demand is reasonably healthy in both the city centre and out-of-town markets and with supply always constrained, pricing remains firm.
EQ 206 Aztec West 3 Temple Quay 10 Templeback The Distillery
Evelyn & Partners Westspring IT Healix Health Services Arm Ramboll
27,406 6,560 6,517 6,472 4,415
G Park Cambridge House B&Q, Station Rd
NFU Mutual Columbia Threadneedle DMGT
MassMutual AEW UK REIT Brocklesby Estate
Industrial Office Retail
£9.00 psf
Prime industrial rent Q1
366,427 sq ft
Industrial take up Q1
Despite a weaker H1 2023 for the industrial market, there were some positive signs in Q3 2023. The total number of deals in Q3 2023 was 36, the same as in Q3 2022, and the same amount of land was transacted in both periods (6 acres). However, the lack of big box deals continued to hold back total take-up, which was 366,427 sq ft in Q3 2023, down 40% on the 590,104 sq ft recorded in Q3 2022. The largest deal in Q3 2023 was 63,120 sq ft, compared to 182,429 sq ft in Q3 2022.
Stover Trading Estate Brightside Park Chittening Estate Weston Industrial Estate Emerald Park
Bristol Bristol Avonmouth Weston-super-Mare Emersons Green
Area
63,120 44,460 29,240 26,456 22,800
New Lease New Lease New Lease New Lease New Lease
Data sources: Carter Jonas, IAS, CoStar, EG Radius, RCA
Offices
5.3%
6.2%
Industrial
1,200
800
400
200
17%
-43%
130%
70%
116,903 sq ft
Part of portfolio £11.5 million £11.7 million
TBC 8.0% 5.8%
-30%
600
*The investment volumes include office, industrial and retail
"There is healthy pent-up demand which should see improved take-up in Q4 2023 and in 2024."
Data sources: Carter Jonas, RCA, Costar
Office The market for high-quality offices in Cambridge continues to perform well. CB1 and the city's science parks remain at the centre of activity with strong rental growth, whereas secondary offices continue to suffer from low demand and static rents. The most significant new letting so far this calendar year was Samsung, which took 33,624 sq ft at One Cambridge Square, Cambridge North. The serviced accommodation sector continues to thrive as occupiers with a hybrid working structure are attracted to the flexibility this model offers. Indeed, the most notable letting over the past quarter was serviced accommodation provider Mantle taking 22,596 sq ft at 95 Regent Street as an assignment at a rent of £40 per sq ft on the ground floor and £32 per sq ft on the upper floors. Lab The quantum of demand for lab accommodation in Cambridge has been well-reported over the last few years. A shortage of stock continues to hamper occupiers’ ability to expand or enter the market. A number of lab schemes are starting to break ground and Building A2 at Unity Campus is close to completion, having been pre-let to Domainex. Just above 50% of the space under development is hybrid, while offices account for 35% of the total. However, the majority will not deliver until the end of 2024 and well into 2025. Two tenants have moved from existing facilities on Babraham Research Campus to a new cutting-edge lab building on the park. Mosaic Therapeutics took 6,878 sq ft of office/lab at £68 psf and Xap Therapeutics took 10,000 sq ft of Lab / Office space. Take-up figures are therefore likely to remain muted and the lack of supply will put further pressure on rents in available buildings, as evidenced by the recent letting to Charm Therapeutics, who leased 13,500 sq ft at Babraham Research Campus at a new record of £71.50 per sq ft on a GIA basis.
95 Regent Street 3000 Cambridge Research Park Eastbrook House Babraham Hall 1000 Cambridge Research Park
Mantle Estates Microchip Touch Solution Eastbrook Facilities Xap Therapeutics HME Clear.com
22,596 19,898 12,452 10,500 10,405
CC OOT CC OOT OOT
Morrisons, Broad St 22-28 Fitzroy St
Morrisons Confidential
Realty Income Corporation Confidential
Part of Portfolio £1.85 million
Phoenix House Rand Logistics Park Kestrel Place
Tempower OHO3 Group Private Individual
37,382 33,045 13,061
New Lease New Lease New Lease
Data sources: Carter Jonas, CoStar, Egi, CoStar
TBC Confidential
Retail Retail
4.4%
5.25%
124,935 sq ft
£12.00 psf
Seller (S) & Buyer (B)
4.1%
8.1%
£55.00 psf
Northern fringe
£37.50 psf
84,946 sq ft
Labs
£71.50 psf
1200
1000
Northern Fringe
-3%
-40%
-50%
-11%
40%
xxx
"A shortage of lab stock continues to hamper occupiers’ ability to expand or enter the market"
Data sources: Carter Jonas, RCA, EG Radius, CoStar
Take-up in the city centre for Q3 totalled 136,915 sq ft, with the most notable transaction being Irwin Mitchell securing a 27,470 sq ft sub-lease at 4 Wellington Place. A letting to Gowling WLG achieved £36psf for 4,444 sq ft at Globe Point, further cementing prime headline rents in the City Centre.
In the out-of-town market, Munroe K has submitted planning permission for a new 145,000 sq ft new-build office at White Rose, targeted as the first BREEAM Outstanding and NABERS 5-star building in the area.
4 Wellington Place 3175 Thorpe Park 4 Wellington Place 12 Wellington Place 12 King Street
Irwin Mitchell Big Change RELX JLL Azets
27,470 12,391 12,334 12,219 11,618
1 Sovereign Street Churwell Vale Unit G, Wakefield 41
Artmax AB Commercial Estates Group Swiss Life Asset Managers
Citi Private Bank Aviva Crossbay
Office Industrial Industrial
The West Yorkshire industrial and logistics market remains strong, despite a slight dampening of occupier demand. While the supply of new units remains extremely tight across Yorkshire and the Humber, in South Yorkshire, a number of units over 100,000 sq ft have recently been completed and remain vacant.
OP65, Gelderd Rd Good Hope Close Pepper Rd Overland Park Roundwood Industrial Estate
A Leadbeater Transport Apelson Appliances Lanes Group Vintage Cash Cow Mockba Modular
65,755 63,980 50,620 38,990 36,410
6.9%
9%
Office, industrial and retail investment in Leeds eased further to about £30 million in Q1 2023, the lowest quarter for investment since 2009. No deals above £10 million were recorded in the first quarter with only three industrial deals above £5 million completed.
£38.5 million £33 million £13.2 million
7% tbc 5.5%
2.3%
3.5%
£8.00 psf
548,629 sq ft
£37 psf
£24.75 psf
Prime office rent Q2
1400
1600
1800
136,915 sq ft
-6%
-9%
28%
-12%
63,734 sq ft
Office take up Q2
12%
Data sources: Carter Jonas, Experian, RCA, CoStar, EG Radius
£62.50 psf
Science parks
64,964 sq ft
The office market remains relatively muted, but there are some encouraging signals, notably a number of large enquiries that are struggling to find suitable space within Oxford in particular. In the last quarter, private healthcare provider Welbeck committed to a 31,700 sq ft building in North Oxford, and TripAdvisor took 17,000 sq ft at Arc Oxford. Office availability remains scarce, due in part to the focus on lab development. Within the lab market, The Oxford Science Park’s purpose-built 97,000 sq ft Iversen Building will be completed in Q4, providing the only speculative built stock in the county. The third quarter saw only small-scale take-up within the lab sector.
Halley Court Building 8100, Oxford ARC Latimer House Schrodinger Building, Oxford Science Park Milton Park
Wellbeck TripAdvisor Yasa Oxford Bio Therapeutics Wild Bioscience
31,687 17,154 6,121 5,002 5,000
The industrial sector has shown encouraging activity in Q3, with approximately 326,000 sq ft of take-up in 12 transactions. The largest transaction during the period was a confidential owner-occupier purchase of 190,000 sq ft at 190 Didcot Quarter. Rental levels continue to spike in certain key locations and within the mid-tech sector. For example, the Catalyst scheme in Bicester has reportedly reached £17.00 psf, with units under offer approaching £20.00 psf. Construction is underway on a range of mid-tech stock at Nebula in Milton Park, The Harwell Campus, and Nova in Oxford.
£17.00 psf
325,987 sq ft
Didcot Quarter Catalyst Windrush Park MXL Centre Talisman Business Park
Confidential Tesla Smurffit NHS OxTS
190,714 23,795 19,930 17,563 12,597
7.7%
Templars Shopping Park Oxfam House HelloFresh, Overthrope Rd
Federated Hermes Sutton City Council NFU Mutual
CBRE Investment Management Confidential MassMutual
Retail Office Industrial
£53 million £51.4 million Part of Portfolio
TBC Confidential TBC
5.1%
6.3%
5.0%
Science Parks
48%
-21%
-1%
"Office availability remains scarce, due in part to the focus on lab development."